By Kathy Chu, TruthDAO
The business — which enables transfers using its affiliated XRP digital asset — is growing rapidly, with payment volume reaching a $15 billion annualized run rate in the first quarter of 2022. RippleNet’s on-demand-liquidity product, which allows funds transfers in 5 seconds or so, grew 8 times in the first quarter compared with the same period the year before.
During a May 26 interview on TruthDAO's "Crypto DeFined", available on Fireside, Birla spoke about what’s bolstering global crypto transfers, why crypto is not so anonymous, and how a legal challenge by the U.S. Securities and Exchange Commission could alter the industry.
Five Key Insights:
RIPPLE LEGAL CASE TO SET PRECEDENT. A lawsuit filed against Ripple in late 2020 by the SEC — alleging that Ripple raised $1.3 billion by selling XRP in an unregistered securities offering — could wrap up in 2023, according to Birla.
Any decision in the case will be closely watched by the crypto industry because it could determine whether other digital assets need to be registered as securities. Ripple has maintained that XRP is a currency, and is not subject to security laws. “The entire crypto industry is looking at this case to set precedent,” he said.
The company isn’t letting the legal proceedings hurt its growth though, according to Birla. “In terms of how it's impacted us, we are coming off record growth in our business. We are resilient as a company.”
CRYPTO WILL BE UBIQUITOUS ONE DAY. “We're all going to use crypto, not only for moving money but for all sorts of other use cases,” said Birla. “It’s going to be embedded into our daily lives. It's going to be plugged into our iPhones. It's going to be plugged in in the background to our cars. It's going to really like be an enabling technology.”
In emerging markets, “people are getting an iPhone or a computer for the first time, and that opens a new way to send and receive money,” said Birla, noting that growth of funds transfers via its platform is slower in the United States, partly because the country is “largely digitized.”
Another reason funds transfers using XRP are growing quickly in regions such as Latin America and Asia Pacific? “In a lot of emerging markets, regulators have been very proactive in terms of regulating crypto, and so banks, financial institutions, and fintechs feel a little bit safer from a regulatory perspective in terms of trying new technologies.”
CRYPTO UNLIKELY USED BY RUSSIA TO EVADE SANCTIONS. When Western financial sanctions were imposed on Russia related to its invasion of Ukraine, regulators openly wondered whether Russia could use crypto to bypass the restrictions.
Unlikely, said Birla. “To move money … you need crypto liquidity in the markets against the fiat currencies like the Russian ruble. If you really, really tried, you could move $200,000 at a time out of Russia using crypto currency because of the very limited liquidity. Russia needs to move $50 to $75 billion a day to function. From a liquidity perspective, that is not going to be possible.”
Birla noted that moving funds out of the crypto world also requires the use of a financial institution or a regulated exchange, both of which would be required to report suspicious transactions. “It’s very hard to use crypto for evading sanctions, (especially for) a massive government like Russia,” he said.
IS CRYPTO THE CURRENCY OF CHOICE FOR CRIMINALS? Because crypto is an open and decentralized technology, the assumption is that anyone can use it for illicit activities, according to Birla.
“It probably happens in small amounts,” he said. “As soon as you try to move significant amounts, there's a lot of different checks and balances … that prohibit (criminals) from using it on a large scale. As soon as they exit the system, they have to be identified.“
REGULATION NEEDED FOR BLOCKCHAIN INNOVATION. Birla believes more innovation would happen on the blockchain — a distributed public ledger — if given more regulatory clarity.
“I don't think the largest financial institutions in the world want to risk their licenses and their good standing with the regulators to experiment with new technology unless the government explicitly says it’s okay to do so, and they’ve been very unclear on that part,” he said.
Regardless, Birla hopes crypto developers will focus on blockchain technologies that will solve "real-world" problems, using RippleNet's money-transfer platform as one example."Folks need to think about building for the longer term in crypto, and it hasn't happened because … there were lower hanging fruit in other areas,” said Birla. “There was a lot of frenzy and money to be made in trading other cryptocurrencies… like NFTs or other tokens."
When asked how Birla himself defines the crypto world these days, the RippleNet executive characterized the industry as “resilient.”
“Every single time that adversity happens, the pundits say this is the end of crypto, but they’re dead wrong,” said Birla. “The industry is so resilient. It bounces back. It corrects. It creates a new platform for the next generation of growth.”
Comments were edited for space and clarity. You can watch the replay of the full interview here.